Some Positive CPU Indicators For AMD’s Stock

AMD’s (NYSE:AMD) share in the global PC processor market has declined in recent years, while Intel has continued to expand its stronghold. However, this year has seen a somewhat different story with the initial success of AMD’s Ryzen processors. These CPUs have shown some promise of delivering competitive power at a lower cost compared to Intel’s. AMD also recently launched the Ryzen Threadripper CPU aimed at high performance applications. So what have been some of the early indicators of Ryzen’s success? Take AMD’s Q2 results, for instance – the company’s computing and graphics division grew 51%, driven by the increase in the number of shipments and nearly 30% jump in average price, with Ryzen shipments playing a very meaningful role. In addition, a reputed CPU benchmark site has reported an uptick in the share of AMD processors being submitted for performance benchmark testing this year. And now, German online retailer mindfactory.de has reported that the share of AMD’s processor sales has jumped drastically on its website, with more than half of the revenue coming from AMD’s products in August 2017 compared to just 35% in March.

There is a possibility that this may just be a temporary uptick due to the recent launch, and the impact could subside once Intel launches its next generation PC processors. However, if this isn’t just a transitory shift, and if AMD can systematically capture share from Intel going forward, there could be significant upside for AMD. You can leverage our interactive platform to see how consistent market share capture can boost AMD’s valuation to nearly $13.50, implying more than 45% upside to our current price estimate of $9. Our price estimate is below the current market price.

See our complete analysis for AMD

AMD is banking on significantly improving its bang-for-the-buck value proposition, and it seems to be working so far. Going forward, there is a chance that AMD could close the gap with Intel in terms of performance, and still maintain a price advantage. If this consistent performance boosts its share to nearly 35%, we expect increased market power and efficiency gains to improve margins and average pricing, implying more than 45% upside to our current price estimate. The market price, which was at $13.20 as of September 5, seems to have incorporated this possibility partially, apart from the expected share gains in server market.

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